E3: Microsoft Could Cut Xbox Prices and Bulk Up Its Capabilities

Microsoft could cut prices of its Xbox 360 250 GB/Kinect soon, at least according to rumors circulating ahead of next week’s E3, the industry’s biggest show of the year. One hint is an ad on the E3 website itself, which promotes the console/Kinect bundle at $299.99. (Clicking through, however, brings you to Target.com, which still lists the package at $399.99. Still…) TG Daily Notes:

If that happens, it would also surely lead to price drops across the board, with the low-end 4 GB Xbox 360 unit potentially hitting a sub-$150 price point.

This kind of price cut will help Microsoft keep people’s interest in the fight for E3 mindshare. It’s up against, Nintendo, which will announce its successor to the Wii, and Sony, which plans to focus on a new handheld system.

Meantime, others speculate Microsoft might be up to something bigger. ZDNet’s Mary Jo Foley wonders if the company will unveil its Project Orapa, which combines Xbox Live and Mediaroom IPTV.

Yesterday, Microsoft’s VP of Corporate Communications Frank Shaw blogged that the vision around Xbox is about delivering “All of the entertainment you want. With the people you care about. Made easy.” Orapa is the thing that brings all of these things together — TV, social networking, music , video and Kinect — into one place via the Xbox.

I can’t help but wonder if a price cut on current Xbox models is a move to clear shelves and make way for new versions that feature Orapa. We’ll see next week.